A rice support program by the Bank for Agriculture and Agricultural Co-operatives has led Thai local farmers to increase their plantation areas by more than 750,000 rai nationwide for the 2003-04 season.Under the mortgage program, the BAAC will set a paddy price equal to investment costs plus a profit margin, a new policy which bank executives say has led farmers to boost their planting due to greater confidence that prices will remain stable.
But bank executives say the increase in plantation areas actually goes against a government zoning policy aimed at limiting crop areas in low-yielding areas.Phacha Promchai, a BAAC senior vice-president overseeing the bank's government secured loan department, said the zoning policy was aimed at ensuring long-term stability for the overall market and bringing supply and demand trends closer together.

Previously, the government set the intervention price based on a price average of the previous three years.But farmers protested that the price was unrealistically low, given that market prices had been depressed over the past several years. In 2001, the government announced a new pricing policy based on production costs plus a profit margin. The result was that mortgage prices from the BAAC were set above market prices, which in turn are based on rice prices in the global market.Mr Phacha said for the 2003/04 season, total plantation area was 57.66 million rai, an increase of 7.58 million rai from the previous year.Production was estimated at 20.9 million tonnes of paddy, an increase of 1.27 million tonnes from last year. The BAAC has set aside 54 billion baht to accept nine million tonnes total of paddy under its loan programme. Farmers are assessed an annual interest rate of 3% for loans, with prices set ranging from 4,500 baht to 7,000 baht per tonne based on quality. Registration for the programme begins on Feb 28.Last year, the BAAC had set a target of 8.7 million tonnes, but received only 3.5 million, as high market prices led farmers to turn away from the support program.